Bank for International Settlements: Digital currencies could disrupt the ability of central banks

The Bank for International Settlements (BIS) said that Digital currencies like Bitcoin could disrupt the ability of central banks to exercise control over the economy or issue money should the technology scale.

“A widespread substitution of banknotes with digital currencies could lead to a decline in central bank non-interest paying liabilities. This, in turn, could lead central banks to substitute interest paying liabilities, reduce their balance sheets, or both. The result could be a reduction in central bank earnings that constitute central bank seigniorage revenue,” said BIS.

On the subject of whether central banks should consider issuing their own currencies based on a distributed ledger, the BIS went so far as to acknowledge that some functions of a central bank could be rendered obsolete.

The Bank for International Settlements is an international company limited by shares owned by central banks which fosters international monetary and financial cooperation and serves as a bank for central banks.